Farron Corporation, which has only one product, has provided the following data
ID: 2469937 • Letter: F
Question
Farron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $124 Units in beginning inventory 0 Units produced 9,100 Units sold 8,700 Units in ending inventory 400 Variable costs per unit: Direct materials $21 Direct labor $63 Variable manufacturing overhead $9 Variable selling and administrative $13 Fixed costs: Fixed manufacturing overhead $136,500 Fixed selling and administrative $9,100 What is the net operating income for the month under absorption costing? $6,000 $17,000 $11,000 $26,200
Explanation / Answer
CALCULATION OF COST PER UNIT
VALUE OF ENDING INVENTORY (400 * $108) = $43200
COST OF GOODS SOLD
= BEGINNING INVENTORY + MANUFACTURING COST OF CURRENT PERIOD - ENDING INVENTORY
= $0 + (9100 * $108) - $43200
= $0 + $982800 - $43200
= $939600
NET OPERATING INCOME
= SALES - CGS - VARIABLE SELLING & ADMIN - FIXED SELLING & ADMIN
= (8700 * $124) - $939600 - (8700 * $13) - $9100
= $1078800 - $939600 - $113100 - $9100
= $17000
DIRECT MATERIAL $21 DIRECT LABOUR $63 VARIABLE MANUFACTURING OVERHEAD $9 FIXED MANUFACTURING OVERHEAD ($136500 / 9100) $15 TOTAL MANUFACTURING COST PER UNIT $108Related Questions
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